Edgar Filing: INTRICON CORP

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


x		QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2013

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____

Commission File Number: 1-5005

INTRICON CORPORATION

(Exact name of registrant as specified in its charter)


	Pennsylvania		23-1069060
	(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

	1260 Red Fox Road
	Arden Hills, Minnesota		55112
	(Address of principal executive offices)		(Zip Code)


	(651) 636-9770
(Registrant’s telephone number, including area code)


	N/A
	(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer o	Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).

o Yes x No

The number of outstanding shares of the registrant’s common stock, $1.00 par value, on July 31, 2013 was 5,701,558.

INTRICON CORPORATION

I N D E X


			Page Numbers

PART I: FINANCIAL INFORMATION

	Item 1.	Financial Statements

		Consolidated Condensed Balance Sheets as of June 30, 2013 (Unaudited) and December 31, 2012	3

		Consolidated Condensed Statements of Operations (Unaudited) for the Three and Six Months Ended June 30, 2013 and 2012	4

		Consolidated Condensed Statements of Comprehensive Income (Loss) (Unaudited) for the Three and Six Months Ended June 30, 2013 and 2012	5

		Consolidated Condensed Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2013 and 2012	6

		Notes to Consolidated Condensed Financial Statements (Unaudited)	7-17

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18-27

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27

	Item 4.	Controls and Procedures	27

PART II: OTHER INFORMATION

	Item 1.	Legal Proceedings	28

	Item 1A.	Risk Factors	28

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28

	Item 3.	Defaults Upon Senior Securities	28

	Item 4.	Mine Safety Disclosures	28

	Item 5.	Other Information	28

	Item 6.	Exhibits	29

	Signatures		30

	Exhibit Index		31

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PART I: FINANCIAL INFORMATION

ITEM 1. Financial Statements

INTRICON CORPORATION
Consolidated Condensed Balance Sheets
(In Thousands, Except Per Share Amounts)


	June 30, 2013			December 31, 2012
	(Unaudited)
Current assets:
Cash	$	108		$	225
Restricted cash		551			563
Accounts receivable, less allowance for doubtful accounts of $106 at June 30, 2013 and $114 at December 31, 2012		6,244			6,877
Inventories		10,139			10,431
Other current assets		1,159			1,424
Current assets of discontinued operations		1,022			1,040
Total current assets		19,223			20,560

Machinery and equipment		33,426			33,577
Less: Accumulated depreciation		28,321			27,578
Net machinery and equipment		5,105			5,999

Goodwill		9,194			9,709
Investment in partnerships		666			773
Other assets, net		997			1,260
Other assets of discontinued operations		314			831
Total assets	$	35,499		$	39,132

Current liabilities:
Checks written in excess of cash	$	444		$	637
Current maturities of long-term debt		2,449			2,945
Accounts payable		4,447			4,015
Accrued salaries, wages and commissions		1,614			1,644
Deferred gain		110			110
Other accrued liabilities		2,279			2,143
Liabilities of discontinued operations		235			173
Total current liabilities		11,578			11,667

Long-term debt, less current maturities		7,264			7,222
Other postretirement benefit obligations		582			590
Accrued pension liabilities		499			510
Deferred gain		220			275
Other long-term liabilities		201			146
Total liabilities		20,344			20,410
Commitments and contingencies (note 12)
Shareholders’ equity:
Common stock, $1.00 par value per share; 20,000 shares authorized; 5,702 and 5,687 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively		5,702			5,687
Additional paid-in capital		16,104			15,797
Accumulated deficit		(6,274	)		(2,360	)
Accumulated other comprehensive loss		(377	)		(402	)
Total shareholders’ equity		15,155			18,722
Total liabilities and shareholders’ equity	$	35,499		$	39,132

(See accompanying notes to the consolidated condensed financial statements)

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INTRICON CORPORATION
Consolidated Condensed Statements of Operations
(In Thousands, Except Per Share Amounts)


	Three Months Ended						Six Months Ended

	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)

Sales, net	$	11,479		$	14,943		$	25,605		$	30,296
Cost of sales		9,617			11,174			19,974			22,227
Gross profit		1,862			3,769			5,631			8,069

Operating expenses:
Sales and marketing		731			754			1,623			1,629
General and administrative		1,367			1,435			2,927			2,889
Research and development		1,249			1,078			2,478			2,161
Restructuring charges (note 3)		199			—			199			—
Total operating expenses		3,546			3,267			7,227			6,679
Operating income (loss)		(1,684	)		502			(1,596	)		1,390

Interest expense		(154	)		(180	)		(307	)		(359	)
Equity in (loss) of partnerships		(77	)		(13	)		(135	)		(37	)
Other income (expense)		(7	)		(9	)		83			(57	)
Income (loss) from continuing operations before income taxes and discontinued operations		(1,922	)		300			(1,955	)		937

Income tax expense		48			57			38			91
Income (loss) before discontinued operations		(1,970	)		243			(1,993	)		846

Loss from discontinued operations, net of income taxes (note 4)
		(1,473	)		(325	)		(1,921	)		(685	)
Net income (loss)	$	(3,443	)	$	(82	)	$	(3,914	)	$	161

Basic income (loss) per share:
Continuing operations	$	(0.34	)	$	0.04		$	(0.35	)	$	0.15
Discontinued operations		(0.26	)		(0.05	)		(0.34	)		(0.12	)
Net income (loss) per share:	$	(0.60	)	$	(0.01	)	$	(0.69	)	$	0.03

Diluted income (loss) per share:
Continuing operations	$	(0.34	)	$	0.04		$	(0.35	)	$	0.14
Discontinued operations		(0.26	)		(0.05	)		(0.34	)		(0.11	)
Net income (loss) per share:	$	(0.60	)	$	(0.01	)	$	(0.69	)	$	0.03

Average shares outstanding:
Basic		5,694			5,670			5,691			5,662
Diluted		5,694			5,670			5,691			5,939

(See accompanying notes to the consolidated condensed financial statements)

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INTRICON CORPORATION
Consolidated Condensed Statements of Comprehensive Income (Loss)
(In Thousands)


	Three Months Ended						Six Months Ended

	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)

Net income (loss)	$	(3,443	)	$	(82	)	$	(3,914	)	$	161
Change in fair value of interest rate swap		12			6			47			5

Gain (loss) on foreign currency translation adjustment		9			(34	)		(22	)		(20	)

Comprehensive income (loss)	$	(3,422	)	$	(110	)	$	(3,889	)	$	146

(See accompanying notes to the consolidated condensed financial statements)

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INTRICON CORPORATION
Consolidated Condensed Statements of Cash Flows
(In Thousands)


	Six Months Ended

	June 30, 2013			June 30, 2012
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net income (loss)	$	(3,914	)	$	161
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		1,254			1,099
Stock-based compensation		265			195
Loss on impairment of long-lived assets and goodwill of discontinued operations		983			—
Loss on disposition of property		4			13
Change in deferred gain		(55	)		(55	)
Change in allowance for doubtful accounts		(8	)		(1	)
Equity in loss of partnerships		135			37
Changes in operating assets and liabilities:
Accounts receivable		553			1,220
Inventories		329			(378	)
Other assets		474			(829	)
Accounts payable		490			(1,599	)
Accrued expenses		69			799
Other liabilities		1			128
Net cash provided by operating activities		580			790

Cash flows from investing activities:
Purchases of property, plant and equipment		(214	)		(1,060	)
Net cash used in investing activities		(214	)		(1,060	)

Cash flows from financing activities:
Proceeds from long-term borrowings		8,899			7,883
Repayments of long-term borrowings		(9,250	)		(7,875	)
Proceeds from employee stock purchases and exercise of stock options		56			107
Change in restricted cash		7			25
Change in checks written in excess of cash		(193	)		253
Net cash (used in) provided by financing activities		(481	)		393

Effect of exchange rate changes on cash		(2	)		(4	)

Net increase (decrease) in cash		(117	)		119
Cash, beginning of period		225			119

Cash, end of period	$	108		$	238

(See accompanying notes to the consolidated condensed financial statements)

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INTRICON CORPORATION

Notes to Consolidated Condensed Financial Statements (Unaudited) (In Thousands, Except Per Share Data)


1.	General

	In the opinion of management, the accompanying consolidated condensed financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly IntriCon Corporation's (“IntriCon” or the “Company”) consolidated financial position as of June 30, 2013 and December 31, 2012, and the consolidated results of its operations for the three and six months ended June 30, 2013 and 2012. Results of operations for the interim periods are not necessarily indicative of the results of operations expected for the full year or any other interim period.

	On June 13, 2013, the Company announced a global restructuring plan to accelerate future growth and reduce costs by approximately $3.0 million annually. As part of the restructuring, the Company is in the process of either selling or disposing of the assets relating to its security, microphone and receiver operations. For all periods presented, the Company classified these businesses as discontinued operations, and, accordingly, has reclassified historical financial data presented herein – See Note 4 below.

	The Company has evaluated subsequent events occurring after the date of the consolidated financial statements for events requiring recording or disclosure in the financial statements.

2.	New Accounting Pronouncements

	In February 2013, the FASB expanded the disclosure requirements with respect to changes in accumulated other comprehensive income (AOCI). Under this new guidance, companies will be required to disclose the amount of income (or loss) reclassified out of AOCI to each respective line item on the statements of earnings where net income is presented. The guidance allows companies to elect whether to disclose the reclassification either in the notes to the financial statements or parenthetically on the face of the financial statements. This update is effective for the Company beginning in the fourth quarter of fiscal 2013. Since the accounting guidance only impacts disclosure requirements, its adoption will not have a material impact on the Company’s consolidated financial statements.

3.	Restructuring Charges

	On June 13, 2013 the Company announced a global strategic restructuring plan designed to accelerate the Company’s future growth by focusing resources on the highest potential growth areas and reduce costs by approximately $3.0 million annually. As part of this plan, the Company is: reducing investment in certain non-core professional audio communications product lines; aggressively transferring specific product lines from Singapore to the Company’s lower-cost manufacturing facility in Batam, Indonesia; reducing global administrative and support workforce; transferring the medical coil operations from the Company's Maine facility to Minnesota to better leverage existing manufacturing capacity, and seeking a buyer for its remaining security, microphone and receiver operations; adding experienced professionals in value hearing health; and focusing more resources in medical biotelemetry. During the three and six months ended June 30, 2013, the Company incurred charges of $199, primarily related to employee termination benefits, from the restructuring of its continuing operations. Additionally, during the second half of 2013, the Company expects to incur approximately $100 to $200 in additional cash charges related to employee termination and moving costs.

4.	Discontinued Operations

	As part of the global strategic restructuring plan, the Company decided to exit the security, microphone and receiver operations to allow the Company to focus on its core body-worn device segment and to improve the Company’s overall margins and profitability. The Company anticipates that it will exit these operations within a one year period and that it will have limited involvement with the operations post disposal. Therefore, under applicable accounting standards, the Company has classified its security, microphone and receivers operations, as discontinued operations for financial reporting purposes in all periods presented.

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	Management considered the global strategic restructuring plan a triggering event and therefore, the Company evaluated assets for impairment as of June 13, 2013 and recorded the following costs for the three and six months ended June 30, 2013: (i) a non-cash impairment charge of $515 relating to goodwill and (ii) a non-cash impairment charge of long-lived assets of $468. Additionally, during the second half of 2013, the Company expects to incur approximately $100 to $150 in additional expense and cash charges related to employee termination costs for the discontinued operations.

	The following table shows the results of operations of the Company’s discontinued operations:


	Three Months Ended						Six Months Ended

	June 30, 2013 (Unaudited)			June 30, 2012 (Unaudited)			June 30, 2013 (Unaudited)			June 30, 2012 (Unaudited)
Sales, net	$	611		$	961		$	1,155		$	2,225
Operating costs and expenses		(1,114	)		(1,286	)		(2,114	)		(2,920	)
Loss on impairment of long lived assets and goodwill		(983	)		—			(983	)		—

Operating loss		(1,486	)		(325	)		(1,942	)		(695	)

Other expenses, net		13			—			21			10
Net loss from discontinued operations	$	(1,473	)	$	(325	)	$	(1,921	)	$	(685	)


	The following table shows the assets and liabilities of the Company’s discontinued operations at June 30, 2013 and December 31, 2012:


	June 30, 2013		December 31, 2012
Cash	$	2	$	1
Accounts receivable, net		353		294
Inventory, net		647		686
Other current assets		20		59
Current assets of discontinued operations		1,022		1,040

Property and equipment, net		271		785
Other assets		43		46
Other assets of discontinued operations		314		831

Accounts payable		86		31
Accrued compensation and other liabilities		149		142
Current liabilities of discontinued operations	$	235	$	173

In determination of the nonrecurring fair value measurements for impairment of goodwill and long-lived assets, the Company utilized the market value approach, considering the fair value of security, microphone and receiver net assets held for sale or disposition. Based on the market value assessment, the Company determined fair values for the identified assets and incurred the impairment charges for the remaining book value of the assets during the three and six months ended June 30, 2013 as set forth in the table below. These charges were reflected in the Company’s results from discontinued operations.

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	Fair value as of measurement date		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Impairment Charge
Long-lived assets of discontinued operations	$	271	$	—	$	—	$	271	$	468
Goodwill of discontinued operations		—		—		—		—		515


5.	Product Warranty

	In general, the Company warrants its products to be free from defects in material and workmanship and will fully conform to and perform to specifications for a period of one year. The following table presents changes in the Company’s warranty liability for the six months ended June 30, 2013 and the year ended December 31, 2012:


	June 30, 2013		December 31, 2012
Beginning balance	$	73	$	82

Warranty expense		5		42
Closed warranty claims		—		(51	)

Ending balance	$	78	$	73


6.	Geographic Information

	The geographical distribution of long-lived assets to geographical areas consisted of the following at:


	June 30, 2013		December 31, 2012
United States	$	3,744	$	4,837
Other – primarily Asia		1,390		1,503

Consolidated	$	5,134	$	6,340

Long-lived assets consist of property and equipment and certain other assets that are difficult to move and relatively illiquid. Excluded from long-lived assets are investments in partnerships, patents, license agreements and goodwill. The Company capitalizes long-lived assets pertaining to the production of specialized parts. These assets are periodically reviewed to assure the net realizable value from the estimated future production based on forecasted cash flows exceeds the carrying value of the assets.

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	The geographical distribution of net sales to geographical areas for the three and six months ended June 30, 2013 and 2012 were as follows:


	Three Months Ended				Six Months Ended

Net Sales to Geographical Areas	June 30, 2013		June 30, 2012		June 30, 2013		June 30, 2012

United States	$	7,949	$	10,782	$	16,930	$	21,751
Germany		233		397		528		987
China		869		822		2,197		1,336
Switzerland		355		255		788		545
Singapore		5		846		124		1,032
France		389		360		801		737
Japan		399		251		781		658
United Kingdom		142		442		750		1,042
Turkey		66		—		177		197
Hong Kong		83		153		286		255
Vietnam		240		267		634		563
All other countries		749		368		1,609		1,193
Consolidated	$	11,479	$	14,943	$	25,605	$	30,296


	Geographic net sales are allocated based on the location of the customer. All other countries include net sales primarily to various countries in Europe and in the Asian Pacific. Customer concentrations greater than 10% of consolidated net sales and account receivable are disclosed below.

	For the three and six months ended June 30, 2013, two customers accounted for 34% and 37% of the Company’s consolidated net sales, respectively. For the three and six months ended June 30, 2012, two customers accounted for a combined 35% and 35% of the Company’s consolidated net sales, respectively.

	At June 30, 2013, three customers combined accounted for 33% of the Company’s consolidated accounts receivable. At December 31, 2012, three customers accounted for a combined 37% of the Company’s consolidated accounts receivable.

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7.	Inventories

	Inventories consisted of the following at:


	Raw materials		Work-in process		Finished products and components		Total

June 30, 2013
Domestic	$	3,834	$	1,240	$	2,107	$	7,181
Foreign		2,520		316		122		2,958
Total	$	6,354	$	1,556	$	2,229	$	10,139

December 31, 2012
Domestic	$	3,698	$	1,379	$	2,376	$	7,453
Foreign		2,504		244		230		2,978
Total	$	6,202	$	1,623	$	2,606	$	10,431


8.	Short and Long-Term Debt

	Short and long-term debt is summarized as follows:


	June 30, 2013			December 31, 2012

Domestic Asset-Based Revolving Credit Facility	$	4,955		$	4,360
Foreign Overdraft and Letter of Credit Facility		1,421			1,795
Domestic Term-Loan		3,250			3,750
Note Payable Datrix Purchase		87			262
Total Debt		9,713			10,167
Less: Current maturities		(2,449	)		(2,945	)
Total Long-Term Debt	$	7,264		$	7,222


Domestic Credit Facilities

The Company and its domestic subsidiaries are parties to a credit facility with The PrivateBank and Trust Company. The credit facility, as amended, provides for:

	§	an $8,000 revolving credit facility, with a $200 sub facility for letters of credit. Under the revolving credit facility, the availability of funds depends on a borrowing base composed of stated percentages of the Company’s eligible trade receivables and eligible inventory, and eligible equipment less a reserve; and

	§	a term loan in the original amount of $4,000.

In December 2012, the Company and its domestic subsidiaries entered into a Fifth Amendment to the Loan and Security Agreement with The PrivateBank and Trust Company. The amendment, among other things:

	§	permitted the Company to borrow an additional $1,250 under the term loan by increasing the then current principal balance of the term loan from $2,750 to $4,000, while keeping the existing amortization schedule in place.

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	§	increased the inventory cap on the borrowing base from $3,000 to $3,500 and removed eligible equipment from the base. Under the revolving credit facility as amended, the availability of funds depends on a borrowing base composed of stated percentages of the Company’s eligible trade receivables and inventory, less a reserve;

	§	eliminated the minimum EBITDA covenant and amended certain other financial covenants; and

	§	changed the dates when covenant compliance will be tested from monthly to quarterly.

The Company was not in compliance with the fixed charge and leverage covenants under the credit facility as of June 30, 2013 and obtained a covenant waiver from The PrivateBank. The Company expects to seek an extension of the term of this facility or a new credit facility in the second half of 2013. As part of the extension or new credit facility the Company will seek revisions to its existing covenants. However, there is no guarantee that any revisions will be favorable to the Company. Additionally, there can be no assurances that a future covenant violation would not lead The PrivateBank or a new lender to declare an event of default and accelerate our obligations under the credit facility.

Loans under the credit facility are secured by a security interest in substantially all of the assets of the Company and its domestic subsidiaries including a pledge of the stock of its domestic subsidiaries. Loans under the credit facility bear interest at varying rates based on the Company’s leverage ratio of funded debt / EBITDA, at the option of the Company, at:

	§	the London InterBank Offered Rate (“LIBOR”) plus 3.00% - 4.00%, or

	§	the base rate, which is the higher of (a) the rate publicly announced from time to time by the lender as its “prime rate” and (b) the Federal Funds Rate plus 0.5%, plus 0.25% - 1.25% depending on the Company’s leverage ratio.

Interest is payable monthly in arrears, except that interest on LIBOR based loans is payable at the end of the one, two or three month interest periods applicable to LIBOR based loans. IntriCon is also required to pay a non-use fee equal to 0.25% per year of the unused portion of the revolving line of credit facility, payable quarterly in arrears.

Weighted average interest on the revolving credit facility was 4.41% for the six months ended June 30, 2013 and 4.52% for the year ended December 31, 2012. The outstanding balance of the revolving credit facility was $4,955 and $4,360 at June 30, 2013 and December 31, 2012, respectively. The total remaining availability on the revolving credit facility was approximately $1,855 and $2,689 at June 30, 2013 and December 31, 2012, respectively. The credit facility expires on August 13, 2014 and all outstanding borrowings will become due and payable.

The outstanding principal balance of the term loan, as amended, is payable in quarterly installments of $250, commencing with the calendar quarter ended December 31, 2012. Any remaining principal and accrued interest is payable on August 13, 2014. IntriCon is also required to use 100% of the net cash proceeds of certain asset sales (excluding inventory and certain other dispositions), sale of capital securities or issuance of debt to pay down the term loan.

Foreign Credit Facility

In addition to its domestic credit facilities, the Company’s wholly-owned subsidiary, IntriCon, PTE LTD., entered into an international senior secured credit agreement with Oversea-Chinese Banking Corporation Ltd. that originally provided for a $1,977 line of credit. The international credit agreement was modified in August 2010 and again in August 2011 to allow for an additional total of $736 in borrowing under the existing base to fund the Singapore facility relocation, Batam facility construction and various other capital needs with varying due dates from 2013 to 2015. Borrowings bear interest at a rate of .75% to 2.5% over the lender’s prevailing prime lending rate. Weighted average interest on the international credit facilities was 3.93% and 3.89% for the six months ended June 30, 2013 and the year ended December 31, 2012. The outstanding balance was $1,421 and $1,795 at June 30, 2013 and December 31, 2012, respectively. The total remaining availability on the international senior secured credit agreement was approximately $647 and $639 at June 30, 2013 and December 31, 2012, respectively.

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	Datrix Promissory Note

	A portion of the purchase price of the Datrix acquisition was paid by the issuance of a promissory note to the seller in the amount of $1,050 bearing annual interest at 6%. In August 2012, the Company amended the agreement to change the remaining installment of $350 from the original due date of August 13, 2012 to equal monthly principal and interest payments starting in October 1, 2012 over a one year period.

9.	Income Taxes

	Income tax expense for the three and six months ended June 30, 2013 was $48 and $38, respectively, compared to $57 and $91for the same periods in 2012. The expense for the three and months ended June 30, 2013 and 2012, was primarily due to foreign operations. The Company has net operating loss carryforwards for U.S. federal income tax purposes and, consequently, minimal federal benefit or expense from the domestic operations was recognized as the deferred tax asset has a full valuation allowance.

	The following was the income (loss) before income taxes for each jurisdiction in which the Company has operations for the three and six months ended June 30, 2013 and 2012:


	Three Months Ended					Six Months Ended

	June 30, 2013			June 30, 2012		June 30, 2013			June 30, 2012
United States	$	(1,330	)	$	61	$	(1,050	)	$	607
Singapore		(747	)		61		(1,196	)		12
Indonesia		15			11		27			23
Germany		140			167		264			295

Income (loss) before income taxes and discontinued operations	$	(1,922	)	$	300	$	(1,955	)	$	937


10.	Shareholders’ Equity and Stock-based Compensation

	The Company has a 2001 stock option plan, a non-employee directors’ stock option plan and a 2006 Equity Incentive Plan. New grants may not be made under the 2001 and the non-employee directors’ stock option plans; however certain option grants under these plans remain exercisable as of December 31, 2012. The aggregate number of shares of common stock for which awards could be granted under the 2006 Equity Incentive Plan as of the date of adoption was 699 shares. The Plan was amended in 2010 and 2012 to authorize an additional 250 and 300 shares, respectively, for issuance under the Plan. Additionally, as outstanding options under the 2001 stock option plan and non-employee directors’ stock option plan expire, the shares of the Company’s common stock subject to the expired options will become available for issuance under the 2006 Equity Incentive Plan.

	Under the various plans, executives, employees and outside directors receive awards of options to purchase common stock. Under the 2006 Equity Incentive Plan, the Company may also grant stock awards, stock appreciation rights, restricted stock units and other equity-based awards, although no such awards, other than awards under the director program and management purchase program described below, had been granted as of June 30, 2013. Under all awards, the terms are fixed on the grant date. Generally, the exercise price of stock options equals the market price of the Company’s stock on the date of the grant. Options under the plans generally vest over three years, and have a maximum term of 10 years.

	Additionally, the board has established the non-employee directors’ stock fee election program, referred to as the director program, as an award under the 2006 Equity Incentive Plan. The director program gives each non-employee director the right under the 2006 Equity Incentive Plan to elect to have some or all of his quarterly director fees paid in common shares rather than cash. There were 0 and 1 shares issued in lieu of cash for director fees under the director program for the three and six months ended June 30, 2013 and 2012, respectively.

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	On July 23, 2008, the Compensation Committee of the Board of Directors approved the non-employee director and executive officer stock purchase program, referred to as the management purchase program, as an award under the 2006 Plan. The purpose of the management purchase program is to permit the Company’s non-employee directors and executive officers to purchase shares of the Company’s Common Stock directly from the Company. Pursuant to the management purchase program, as amended, participants may elect to purchase shares of Common Stock from the Company not exceeding an aggregate of $100 during any fiscal year. Participants may make such election one time during each twenty business day period following the public release of the Company’s earnings announcement, referred to as a window period, and only if such participant is not in possession of material, non-public information concerning the Company and subject to the discretion of the Board to prohibit any transactions in Common Stock by directors and executive officers during a window period. There were no shares purchased under the management purchase program during the three and six months ended June 30, 2013 and 2012, respectively.

	Stock option activity as of and during the six months ended June 30, 2013 was as follows:


	Number of Shares			Weighted-average Exercise Price		Aggregate Intrinsic Value

Outstanding at December 31, 2012		1,244		$	5.97
Options forfeited or cancelled		—			—
Options granted		192			4.06
Options exercised		(2	)		2.41

Outstanding at June 30, 2013		1,434		$	5.72	$	251

Exercisable at June 30, 2013		1,063		$	6.02	$	251

Available for future grant at December 31, 2012		359

Available for future grant at June 30, 2013		167


	The number of shares available for future grant at June 30, 2013 does not include a total of up to 265 shares subject to options outstanding under the 2001 stock option plan and non-employee directors’ stock option plan as of June 30, 2013, which will become available for grant under the 2006 Equity Incentive Plan in the event of the expiration of such options.

	The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of subjective assumptions, including the expected stock price volatility. Because the Company’s options have characteristics different from those of traded options, in the opinion of management, the existing models do not necessarily provide a reliable single measure of the fair value of its options. The weighted average fair value of options granted was $2.60 and $2.52, respectively, for options granted during the three and six months ended June 30, 2013. The weighted average fair value of options granted was $4.28 and $3.84, respectively, for options granted during the three and six months ended June 30, 2012.

	The Company calculates expected volatility for stock options and awards using the Company’s historical volatility.

	The Company currently estimates a five percent forfeiture rate for stock options, but will continue to review this estimate in future periods.

	The risk-free rates for the expected terms of the stock options and awards are based on the U.S. Treasury yield curve in effect at the time of grant.

	The weighted average remaining contractual life of options exercisable at June 30, 2013 was 4.50 years.

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	The Company recorded $134 and $265 of non-cash stock option expense for the three and six months ended June 30, 2013, respectively. The Company recorded $99 and $195 of non-cash stock option expense for the three and six months ended June 30, 2012, respectively. As of June 30, 2013, there was $903 of total unrecognized compensation costs related to non-vested awards that are expected to be recognized over a weighted-average period of 1.98 years.

	The Company also has an Employee Stock Purchase Plan (the “Purchase Plan”). The Purchase Plan initially provided that a maximum of 100 shares may be sold under the Purchase Plan as of the date of adoption. On April 27, 2011, the Company’s shareholders approved an amendment to the Purchase Plan to increase the number of shares which may be purchased under the plan by an additional 100 shares. There were 7 and 12 shares purchased under the plan for the three and six months ended June 30, 2013, respectively, and a total of 5 and 9 shares purchased for the three and six months ended June 30, 2012, respectively.

11.	Income Per Share

	The following table presents a reconciliation between basic and diluted earnings per share:


	Three Months Ended						Six Months Ended

	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
Numerator:
Income (loss) before discontinued operations
	$	(1,970	)	$	243		$	(1,993	)	$	846

Loss from discontinued operations, net of income taxes (note 4)		(1,473	)		(325	)		(1,921	)		(685	)

Net income (loss)	$	(3,443	)	$	(82	)	$	(3,914	)	$	161

Denominator:
Basic – weighted shares outstanding		5,694			5,670			5,691			5,662
Weighted shares assumed upon exercise of stock options		—			—			—			277

Diluted – weighted shares outstanding		5,694			5,670			5,691			5,939
Basic income (loss) per share:
Continuing operations	$	(0.34	)	$	0.04		$	(0.35	)	$	0.15
Discontinued operations		(0.26	)		(0.05	)		(0.34	)		(0.12	)
Net income (loss) per share:	$	(0.60	)	$	(0.01	)	$	(0.69	)	$	0.03

Diluted income (loss) per share:
Continuing operations	$	(0.34	)	$	0.04		$	(0.35	)	$	0.14
Discontinued operations		(0.26	)		(0.05	)		(0.34	)		(0.11	)
Net income (loss) per share:	$	(0.60	)	$	(0.01	)	$	(0.69	)	$	0.03

The dilutive impact summarized above relates to the periods when the average market price of Company stock exceeded the exercise price of the potentially dilutive option securities granted. Earnings per common share was based on the weighted average number of common shares outstanding during the periods when computing the basic earnings per share. When dilutive, stock options are included as equivalents using the treasury stock method when computing the diluted earnings per share.

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	Excluded from the computation of diluted earnings per share for the three and six months ended June 30, 2013 were all options outstanding of approximately 1,434 common shares, due to the Company’s net loss in the periods. Excluded from the computation of diluted earnings per share for the six months ended June 30, 2012 were outstanding options to purchase approximately 329 common shares because the effect was anti-dilutive. All shares were excluded from the diluted earnings per share computation from the three months ended June 30, 2012 due to the net loss for the period.

12.	Legal Proceedings

	The Company is a defendant along with a number of other parties in lawsuits alleging that plaintiffs have or may have contracted asbestos-related diseases as a result of exposure to asbestos products or equipment containing asbestos sold by one or more named defendants. These lawsuits relate to the discontinued heat technologies segment which was sold in March 2005. Due to the non-informative nature of the complaints, the Company does not know whether any of the complaints state valid claims against the Company. Certain insurance carriers have informed the Company that the primary policies for the period August 1, 1970-1978 have been exhausted and that the carriers will no longer provide defense and insurance coverage under those policies. However, the Company has other primary and excess insurance policies that the Company believes afford coverage for later years. Some of these other primary insurers have accepted defense and insurance coverage for these suits, and some of them have either ignored the Company’s tender of defense of these cases, or have denied coverage, or have accepted the tenders but asserted a reservation of rights and/or advised the Company that they need to investigate further. Because settlement payments are applied to all years a litigant was deemed to have been exposed to asbestos, the Company believes that it will have funds available for defense and insurance coverage under the non-exhausted primary and excess insurance policies. However, unlike the older policies, many of the policies covering later years (approximately 1984 and thereafter) have exclusions for any asbestos products or operations, and thus do not provide insurance coverage for asbestos-related lawsuits. Management believes that the number of insurance carriers involved in the defense of the suits, and the significant number of policy years and policy limits under which these insurance carriers are insuring the Company, make the ultimate disposition of these lawsuits not material to the Company’s consolidated financial position or results of operations.

	The Company’s former French subsidiary, Selas SAS, filed for insolvency in France and is being managed by a court appointed judiciary administrator. The Company may be subject to additional litigation or liabilities as a result of the French insolvency proceeding.

13.	Related-Party Transactions

	One of the Company’s subsidiaries leases office and factory space from a partnership consisting of three present or former officers of the subsidiary, including Mark Gorder, a member of the Company’s Board of Directors and the President and Chief Executive Officer of the Company. The subsidiary is required to pay all real estate taxes and operating expenses. The total base rent expense, real estate taxes and other charges incurred under the lease were approximately $120 and $242 for the three and six months ended June 30, 2013, respectively, and approximately $120 and $240 for the three and six months ended June 30, 2012, respectively.

	The Company uses the law firm of Blank Rome LLP for legal services. A partner of that firm is the son-in-law of the Chairman of the Company’s Board of Directors. For the three and six months ended June 30, 2013, the Company paid that firm approximately $47 and $73, respectively, for legal services and costs. For the three and six months ended June 30, 2012, the Company paid that firm approximately $50 and $66, respectively, for legal services and costs. The Chairman of our Board of Directors is considered independent under applicable Nasdaq and Securities Exchange Commission rules because (i) no payments were made to the Chairman or the partner directly in exchange for the services provided by the law firm and (ii) the amounts paid to the law firm did not exceed the thresholds contained in the Nasdaq standards. Furthermore, the aforementioned partner does not provide any legal services to the Company and is not involved in billing matters.

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14.	Statements of Cash Flows

	The following table provides supplemental disclosures of cash flow information:


	Six Months Ended
	June 30, 2013		June 30, 2012

Interest paid	$	138	$	408


15.	Investment in Partnerships

	The Company owns a 9% partnership interest in the Hearing Instrument Manufacturers Patent Partnership (HIMPP), and is a party to a license agreement that grants the Company access to over 45 US registered patents. The Company recorded a decrease of $77 and $135 in the carrying amount of the investment, reflecting amortization of the patents, other intangibles and the Company’s portion of the partnership’s operating results for the three and six months ended June 30, 2013, respectively. The Company recorded a decrease of $39 and $88 in the carrying amount of the investment, reflecting amortization of the patents, other intangibles and the Company’s portion of the partnership’s operating results for the three and six months ended June 30, 2012, respectively.

	In August 2012, the Company sold its 50% interest in its Global Coils joint venture to its joint venture partner Audemars SA. The Company recorded a $25 and $50 increase in the carrying amount of the investment, reflecting the Company’s portion of the joint venture’s operating results for the three and six months ended June 30, 2012, respectively.

16.	Revenue by Market

	The following tables set forth, for the periods indicated, net revenue by market:


	Three Months Ended				Six Months Ended
	June 30, 2013		June 30, 2012		June 30, 2013		June 30, 2012

Medical	$	4,890	$	6,183	$	12,014	$	12,287
Hearing Health		4,989		6,201		10,227		13,774
Professional Audio Communications		1,600		2,559		3,364		4,235

Total Revenue	$	11,479	$	14,943	$	25,605	$	30,296

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Business Overview

Headquartered in Arden Hills, Minnesota, IntriCon Corporation (together with its subsidiaries referred to as the “Company”, “IntriCon,” “we”, “us” or “our”) is an international company engaged in designing, developing, engineering and manufacturing body-worn devices. In addition to its operations in Minnesota, the Company has facilities in Maine, California, Singapore, Indonesia and Germany.

Information contained in this section of this Quarterly Report on Form 10-Q and expressed in U.S. dollars is presented in thousands (000s), except for per share data and as otherwise noted.

On June 13, 2013, the Company announced a global strategic restructuring plan designed to accelerate the Company’s future growth by focusing resources on the highest potential growth areas and reduce costs by approximately $3.0 million annually. As part of the restructuring plan, the Company decided to exit the security, microphone and receiver businesses operations to allow the Company to focus on its core body-worn device segment and to improve the Company’s overall margins and profitability. The Company is in the process of disposing the assets relating to the security, microphone and receiver operations. For all periods presented, the Company classified these operations as discontinued operations and, accordingly, has reclassified historical financial data presented herein

Market Overview

IntriCon serves the body-worn device market by designing, developing, engineering and manufacturing micro-miniature products, microelectronics, micro-mechanical assemblies and complete assemblies, primarily for bio-telemetry devices, hearing instruments and professional audio communication devices. Revenue from the medical bio-telemetry and value hearing health markets is reported on the respective medical and hearing health lines in the discussion of our results of operation in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 16 “Revenue by Market” to the Company’s consolidated condensed financial statements included herein.

Medical Bio-Telemetry

In the medical bio-telemetry market, the Company is focused on sales of bio-telemetry devices for life-critical diagnostic monitoring. Using our nanoDSP and BodyNet™ technology platforms, the Company manufactures microelectronics, micro-mechanical assemblies, high-precision injection-molded plastic components and complete bio-telemetry devices for emerging and leading medical device manufacturers. The medical industry is faced with pressures to reduce the cost of healthcare. Driven by core technologies, such as the IntriCon Physiolink™ that wirelessly connects patients and care givers in non-traditional ways, IntriCon helps shift the point of care from expensive traditional settings, such as hospitals, to less expensive non-traditional settings like the home. IntriCon currently serves this market by offering medical manufacturers the capabilities to design, develop and manufacture medical devices that are easier to use, are more miniature, use less power, and are lighter. Increasingly, the medical industry is looking for wireless, low-power capabilities in their devices. We have a strategic partnership with Advanced Medical Electronics Corp. (AME) that allows us to develop new bio-telemetry devices that better connect patients and care givers, providing critical information and feedback. Through the further development of our ULP BodyNet family, we believe the bio-telemetry markets offer significant opportunity.

IntriCon currently has a strong presence in both the diabetes and cardiac diagnostic monitoring bio-telemetry markets. For diabetes, IntriCon has partnered with Medtronic to manufacture their wireless continuous glucose monitors that measure glucose levels and deliver real-time blood glucose trend information. Along with the wireless glucose monitor, IntriCon also manufactures a variety of related accessories. Further, we believe there are opportunities to expand our diabetes product offering with Medtronic as well as move into new markets outside of the diabetes market.

In the cardiac diagnostic monitoring market, we provide solutions for ambulatory cardiac monitoring. We entered this market through an acquisition of Jon Barron, Inc. doing business as Datrix (“Datrix”) in 2009. Our first two product platforms, Sirona and Centauri, received Food and Drug Administration (FDA) 510(k) approval in late 2011. The Sirona platform, which incorporates the PhysioLink technology, is essentially two products in one design is it can be used as an event recorder, a holter monitor or both. This platform is very small, rechargeable, and water spray proof. The features of the Centauri platform are event recording combined with wireless transmission of the patient data to a remote service center, which then forwards the information to the doctor.

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In addition, IntriCon manufactures and supplies bubble sensors and flow restrictors that monitor and control the flow of fluid in an intravenous infusion system. IntriCon also manufactures a family of safety needle products for an original equipment manufacturing (OEM) customer that utilizes IntriCon’s insert and straight molding capabilities. These products are assembled using full automation, including built-in quality checks within the production lines.

IntriCon is targeting other emerging biotelemetry and home care markets, such as sleep apnea, that could benefit from its capabilities to develop devices that are more technologically advanced, smaller and lightweight. To do so, IntriCon is focusing more capital and resources in sales and marketing to expand its reach to other large medical device and health care companies.

Value Hearing Health Market

The Company believes the value hearing health (VHH) market offers significant growth opportunities. In the United States alone, there are approximately 36 million hearing impaired individuals. This population is expected to grow significantly over the next ten years as 65-year-old-plus age demographic is one of the fastest growing segments in the U.S., Europe and Japan. The current U.S. market penetration into the hearing impaired population is approximately 20%. We believe the U.S. market penetration is low primarily due to high costs to purchase a hearing device and inconveniences in the conventional hearing health distribution channel. This has created the opportunity for alternative care models, such the value hearing aid (VHA) channel and personal sound amplifier (PSAP) channel. To capitalize on these opportunities, IntriCon has increased its sales and marketing expertise and hired an industry veteran to help spearhead the company’s efforts in the VHA market. The Company will be aggressively pursuing larger customers who can benefit from our value proposition.

In the VHA channel, the Company entered into a manufacturing agreement with hi HealthInnovations, a UnitedHealth Group company, to become their supplier of hearing aids. At the beginning of 2012, hi HealthInnovations launched a suite of high-tech, lower-cost hearing devices for their Medicare and Part D participants and later in the year announced they were increasing this offering to the over 26 million people enrolled in their employer-sponsored and individual health benefit plans. The insurance model has been successfully demonstrated internationally, where several countries providing a full insurance program are serving 40 to 70% of hearing impaired population. Further, research in the US has shown a fully insured model will encourage an individual to seek treatment at an earlier stage of hearing loss, greatly increasing the market size and penetration.

In personal sound amplifier products, the FDA has created a PSAP category; it is analogous to “reader glasses” in the optical market and provides a cost effective sound amplification device. These devices are not hearing aids and make no claims of compensating for hearing loss. They can be purchased “off-the-shelf” and are not fit or prescribed to meet a specific individual’s needs. Rather, these devices amplify sound and tend to be used in noisy or challenging environments. They have a significantly lower retail price to the consumer than traditional hearing aids.

We also believe there are niches in the conventional hearing health channel that will embrace our VHH proposition, as high costs constrain their growth potential. Additionally, we believe there is a large international market, most notably in the so-called BRIC countries (Brazil, Russia, India and China) for this type of product offering.

We believe IntriCon is very well positioned to serve these VHH market channels. Over the past several years the Company has invested heavily in core technologies, product platforms and its global manufacturing capabilities geared to provide high-tech, lower-cost hearing devices. Our DSP devices provide better clarity and an improved ability to filter out background noise at attractive pricing points. We believe product platform introductions such as the Audion Amplifiers, APT™ and Lumen™ devices will drive market share gains into all channels of the emerging VHH market.

Professional Audio Communications

IntriCon entered the high-quality audio communication device market in 2001, and now has a line of miniature, professional audio headset products used by customers focusing on emergency response needs. The line includes several communication devices that are extremely portable and perform well in noisy or hazardous environments. These products are well suited for applications in the fire, law enforcement, safety, aviation and military markets. In addition, the Company has a line of miniature ear- and head-worn devices used by performers and support staff in the music and stage performance markets. The Company also serves the Singapore government in this market. We believe performance in difficult listening environments and wireless operations will continue to improve as these products increasingly include our proprietary nanoDSP, wireless nanoLink and PhysioLink technologies.

The Company sees great opportunity to market its situational listening devices (SLD’s). Much like the PSAP devices, these devices are intended to help people hear in noisy environments like restaurants and automobiles, and listen to television, music, and direct broadcast by wireless connection. Such devices are intended to be supplements to conventional hearing aids, which do not handle those situations well. The SLD’s will be based on our PhysioLink technology, which were recently demonstrated at the annual convention of the American Academy of Audiology. The product line consists of an earpiece, TV transmitter, companion microphone, iPod/iPhone transmitter, and USB transmitter. With the emergence of advanced parallel technologies in both the SLD and PSAP markets, the Company will likely shift recognition of many professional audio communications product sales into the value hearing health market in future years.

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Core Technologies Overview

Our core technologies expertise is focused on three main markets: medical bio-telemetry, value hearing health and professional audio communications. Over the past several years, the Company has increased investments in the continued development of four critical core technologies: Ultra-Low-Power (ULP) Digital Signal Processing (DSP), Ultra-Low-Power Wireless, Microminiaturization, and Miniature Transducers. These four core technologies serve as the foundation of current and future product platform development, designed to meet the rising demand for smaller, portable more advanced devices. The continued advancements in this area have allowed the Company to further enhance the mobility and effectiveness of miniature body-worn devices.

Ultra-Low-Power Digital Signal Processing

DSP converts real-world analog signals into a digital format. Through our nanoDSP™ technology, IntriCon offers an extensive range of ULP DSP amplifiers for hearing, medical and professional audio applications. Our proprietary nanoDSP incorporates advanced ultra-miniature hardware with sophisticated signal processing algorithms to produce devices that are smaller and more effective.

During 2012 the Company further expanded its DSP portfolio including improvements to its Reliant CLEAR™ feedback canceller, offering increased added stable gain and faster reaction time. Additionally, newly developed DSP technologies are utilized in our recently unveiled Audion4™, our new four-channel hearing aid amplifier. The Audion4 is a feature-rich amplifier designed to fit a wide array of applications. In addition to multiple compression channels, the amplifier has a complete set of proven adaptive features which greatly improve the user experience.

Ultra-Low-Power Wireless

Wireless connectivity is fast becoming a required technology, and wireless capabilities are especially critical in new body-worn devices. IntriCon’s BodyNet™ ULP technology, including the nanoLink™ and PhysioLink™ wireless systems, offers solutions for transmitting the body’s activities to caregivers, and wireless audio links for professional communications and surveillance products. Potential BodyNet applications include electrocardiogram (ECG) diagnostics and monitoring, diabetes monitoring, sleep apnea studies and audio streaming for hearing devices.

IntriCon is in the final stages of commercializing its PhysioLink wireless technology, which will be incorporated into product platforms serving the medical, hearing health and professional audio communication markets. This system is based on 2.4GHz proprietary digital radio protocol in the industrial-scientific-medical (ISM) frequency band and enables audio and data streaming to ear-worn and body-worn applications over distances of up to five meters.

Microminiaturization

IntriCon excels at miniaturizing body-worn devices. We began honing our microminiaturization skills over 30 years ago, supplying components to the hearing health industry. Our core miniaturization technology allows us to make devices for our markets that are one cubic inch and smaller. We also are specialists in devices that run on very low power, as evidenced by our ULP wireless and DSP. Less power means a smaller battery, which enables us to reduce size even further, and develop devices that fit into the palm of one’s hand.

Miniature Transducers

IntriCon’s advanced microphone and receiver technology has been pushing the limits of size and performance for over a decade. Our miniature transducers, which have been incorporated into various product platforms, enhance the reliability, sensitivity, supply voltage, and output level in body-worn devices. These enhancements allow us to make devices that are extremely portable and perform well in noisy or hazardous environments. These small devices are well-suited for applications in the aviation, fire, law enforcement, safety and military markets. Our technology also is used for technical surveillance by law enforcement and by performers and production staff in the music and stage performance markets. Also included in our transducer line are medical coils and micro coils used in pacemaker programming and interventional catheter positioning applications.

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Forward-Looking and Cautionary Statements

Certain statements included in this Quarterly Report on Form 10-Q or documents the Company files with the Securities and Exchange Commission, which are not historical facts, or that include forward-looking terminology such as “may”, “will”, “believe”, “anticipate”, “expect”, “should”, “optimistic” “continue”, “estimate”, “intend”, “plan”, “would”, “could”, “guidance”, “potential”, “opportunity”, “project”, “forecast”, “confident”, “projections”, “schedule”, “designed”, “future”, “discussion”, “if” or the negative thereof or other variations thereof, are forward-looking statements (as such term is defined in Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933, and the regulations thereunder), which are intended to be covered by the safe harbors created thereby. These statements may include, but are not limited to statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Notes to the Company’s Condensed Consolidated Financial Statements” such as net operating loss carryforwards, the ability to meet cash requirements for operating needs, the ability to meet liquidity needs, assumptions used to calculate future level of funding of employee benefit plans, the adequacy of insurance coverage, the impact of new accounting pronouncements and litigation.

Forward-looking statements also include, without limitation, statements as to the Company’s expected future results of operations and growth, the Company’s ability to meet working capital requirements, the Company’s business strategy, the expected increases in operating efficiencies, anticipated trends in the Company’s markets, estimates of goodwill impairments and amortization expense of other intangible assets, estimates of future royalty payments from the Global Coils sale, the effects of changes in accounting pronouncements, the effects of litigation and the amount of insurance coverage, expected costs and savings from the restructuring, and statements as to trends or the Company’s or management’s beliefs, expectations and opinions.

Forward-looking statements are subject to risks and uncertainties and may be affected by various factors that may cause actual results to differ materially from those in the forward-looking statements. In addition to the factors discussed in this Quarterly Report on Form 10-Q, certain risks, uncertainties and other factors can cause actual results and developments to be materially different from those expressed or implied by such forward-looking statements, including, without limitation, the following:


	§	the ability to successfully implement the Company’s business and growth strategy;
	§	risks arising in connection with the insolvency of our former subsidiary, Selas SAS, and potential liabilities and actions arising in connection therewith;
	§	potential obligations to indemnify the purchaser of our former electronics business for certain material claims that may arise;
	§	the volume and timing of orders received by the Company, particularly from Medtronic and hi HealthInnovations;
	§	changes in estimated future cash flows;
	§	ability to collect on our accounts receivable;
	§	foreign currency movements in markets the Company services;
	§	changes in the global economy and financial markets;
	§	the effects of federal government budget cutting and the sequestration;
	§	weakening demand for the Company’s products due to general economic conditions;
	§	changes in the mix of products sold;
	§	ability to meet demand;
	§	changes in customer requirements;
	§	timing and extent of research and development expenses;
	§	FDA approval, timely release and acceptance of the Company’s products;
	§	competitive pricing pressures;
	§	pending and potential future litigation;
	§	cost and availability of electronic components and commodities for the Company’s products;
	§	ability to create and market products in a timely manner and develop products that are inexpensive to manufacture;
	§	ability to comply with covenants in our debt agreements;
	§	ability to repay debt when it comes due;
	§	we may be in violation of our bank covenants from time to time;
	§	the loss of one or more of our major customers;
	§	ability to identify, complete and integrate acquisitions;
	§	effects of legislation;
	§	effects of foreign operations;
	§	ability to develop new products such as Centauri, Overtus, Scenic and APT;
	§	ability to recruit and retain engineering and technical personnel;
	§	the costs and risks associated with research and development investments;
	§	risks under our manufacturing agreement with hi HealthInnovations;
	§	the risk that the royalties under the Global Coils sale agreement will be less than estimated;
	§	the recent recessions in Europe and the debt crisis in certain countries in the European Union;
	§	our ability and the ability of our customers to protect intellectual property; and
	§	loss of members of our senior management team.

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For a description of these and other risks, see Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, and other risks described elsewhere in this Quarterly Report on Form 10-Q, or in other filings the Company makes from time to time with the Securities and Exchange Commission. The Company does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of the Company.

Critical Accounting Policies

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period.

Certain accounting estimates and assumptions are particularly sensitive because their significance to the consolidated condensed financial statements and the possibility that future events affecting them may differ markedly. The accounting policies of the Company with significant estimates and assumptions include the Company’s revenue recognition, accounts receivable reserves, inventory valuation, goodwill, long-lived assets, deferred taxes policies and employee benefit obligations. These and other significant accounting policies are described in and incorporated by reference from “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Note 1 to the financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

Results of Operations

Sales, net

Our net sales are comprised of three main markets: medical, hearing health, and professional audio communications. Below is a summary of our sales by main markets for the three and six months ended June 30, 2013 and 2012:


							Change
Three Months Ended June 30	2013			2012			Dollars				Percent
Medical		$	4,890		$	6,183		$	(1,293	)		-20.9	%
Hearing Health			4,989			6,201			(1,212	)		-19.5	%
Professional Audio Communications			1,600			2,559			(959	)		-37.5	%
Consolidated Net Sales		$	11,479		$	14,943		$	(3,464	)		-23.2	%

Six Months Ended June 30
Medical		$	12,014		$	12,287		$	(273	)		-2.2	%
Hearing Health			10,227			13,774			(3,547	)		-25.8	%
Professional Audio Communications			3,364			4,235			(871	)		-20.6	%
Consolidated Net Sales		$	25,605		$	30,296		$	(4,691	)		-15.5	%

For the three and six months ended June 30, 2013, we experienced a decrease of 20.9% and 2.2%, respectively, in net sales in the medical market compared to the same periods in 2012. The decrease was driven by the previously disclosed expected reduction in medical sales to Medtronic as they await FDA approval of their MiniMed 530G insulin pump system. The Company expects medical sales to strengthen in the second half of the year. Management believes that the industry-wide trend to shift the point of care from expensive traditional settings, such as hospitals, to less expensive non-traditional settings like the home, will result in growth of the medical bio-telemetry industry. IntriCon currently serves this market by offering medical manufacturers the capabilities to design, develop and manufacture medical devices that are easier to use, are more miniature, use less power, and are lighter. IntriCon has a strong presence in both the diabetes market, with its Medtronic partnership, and cardiac diagnostic monitoring bio-telemetry market. The Company believes there are growth opportunities in these markets as well other emerging biotelemetry and home care markets, such as sleep apnea, that could benefit from its capabilities to develop devices that are more technologically advanced, smaller and lightweight.

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Net sales in our hearing health business for the three and six months ended June 30, 2013 decreased 19.5% and 25.8%, respectively, compared to the same periods in 2012. Decreases in the periods were primarily due to the expected reduced purchases by hi HealthInnovations and the continued softness in the conventional channel consistent with industry trends. As of mid-2012, we satisfied hi HealthInnovations’ initial product ramp-up needs and therefore have received minimal orders for the second half of 2012 and early 2013. hi HealthInnovations continues to make progress building the infrastructure to provide high-quality, affordable hearing health care to a broad range of customers. Although we do not anticipate that hi HealthInnovations will begin to ramp until the second half of the year, we remain very optimistic about the progress that has been made and the long term prospects of this market-changing program. Market dynamics, such as low penetration rates, an aging population, and the need for reduced cost and convenience, have resulted in the emergence of alternative care models, such the insurance channel and PSAP channel. IntriCon believes it is very well positioned to serve these value hearing health market channels. IntriCon has hired an industry veteran to help spearhead the Company’s efforts in the value hearing aid (VHA) market. The Company will be aggressively pursuing larger customers who can benefit from our value proposition. Over the past several years, the Company has invested heavily in core technologies, product platforms and its global manufacturing capabilities geared to provide high-tech, lower-cost hearing devices. Our DSP devices provide better clarity and an improved ability to filter out background noise at attractive pricing points. We believe product platform introductions such as the APT™ and Lumen™ devices will drive market share gains into all channels of the emerging value hearing health market.

Net sales to the professional audio device sector decreased 37.5% and 20.6%, respectively, for the three and six months ended June 30, 2013 compared to the same periods in 2012. The decline was primarily due to the conclusion of the Company’s Singapore government contract in 2012. Over the next few quarters, IntriCon anticipates securing additional contracts with the Singapore government. Additionally, we believe our extensive portfolio of communication devices that are portable, smaller and perform well in noisy or hazardous environments will provide future long-term growth in this market.

Gross profit

Gross profit, both in dollars and as a percent of sales, for the three and six months ended June 30, 2013 and 2012, was as follows:


	2013					2012					Change
Three Months Ended June 30	Dollars		Percent of Sales			Dollars		Percent of Sales			Dollars			Percent
Gross profit	$	1,862		16.2	%	$	3,769		25.2	%	$	(1,907	)		-50.6	%
Six Months Ended June 30
Gross profit	$	5,631		22.0	%	$	8,069		26.6	%	$	(2,438	)		-30.2	%

The 2013 gross profit decrease over the comparable prior year periods was primarily due to lower overall sales volume. Several of the activities associated with the Company’s global strategic restructuring plan are focused on a reduction in overhead costs and increased product contribution margins, including: aggressively transferring specific product lines from Singapore to the Company’s lower-cost manufacturing facility in Batam, Indonesia; reducing global administrative and support workforce; and transferring the medical coil business from the Company’s Maine facility to Minnesota to better leverage existing manufacturing capacity. We anticipate gross profit to strengthen in the second half of the year.

Sales and Marketing, General and Administrative and Research and Development Expenses

Sales and marketing, general and administrative and research and development expenses for the three and six months ended June 30, 2013 and 2012 were:


	2013				2012				Change
Three Months Ended June 30		Dollars	Percent of Sales			Dollars	Percent of Sales			Dollars		Percent
Sales and marketing	$	731	6.4	%	$	754	5.0	%	$	(23	)	-3.1	%
General and administrative		1,367	11.9	%		1,435	9.6	%		(68	)	-4.7	%
Research and development		1,249	10.9	%		1,078	7.2	%		171		15.9	%

Six Months Ended June 30
Sales and marketing	$	1,623	6.3	%	$	1,629	5.4	%	$	(6	)	-0.4	%
General and administrative		2,927	11.4	%		2,889	9.5	%		38		1.3	%
Research and development		2,478	9.7	%		2,161	7.1	%		317		14.7	%

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Sales and marketing and general and administrative expenses were comparable to prior year periods but decreased slightly for the three months ended June 30, 2013 due to both temporary and permanent restructuring measures taken by the Company. Research and development increased over the prior year three and six month periods primarily due to an increase in software depreciation costs and outside contracted work, partially offset by restructuring measures.

Restructuring charges

During the three and six months ended June 30, 2013, the Company incurred charges of $199, primarily related to employee termination severance costs, from the restructuring of its continuing operations. On June 13, 2013, the Company announced a global strategic restructuring plan designed to accelerate the Company’s future growth by focusing resources on the highest potential growth areas and reduce costs by approximately $3.0 million annually. The Company expects to incur an additional range of $200 to $300 in restructuring charges throughout the remainder of 2013.

Interest expense

Net interest expense for the three and six months ended June 30, 2013 was $154 and $307, respectively, compared to $180 and $359 for the respective periods in 2012. The decrease in interest expense was primarily due to lower average debt balances as compared to the prior year.

Equity in loss of partnerships

The equity in loss of partnerships for the three and six months ended June 30, 2013 was $77 and $135, respectively, compared to $13 and $37 for the respective periods in 2012, due to changes in carrying amounts described below.

The Company recorded a decrease of $77 and $135 in the carrying amount of its HIMPP investment, reflecting amortization of the patents, other intangibles and the Company’s portion of the partnership’s operating results for the three and six months ended June 30, 2013, respectively, compared to a decrease of $38 and $87 in the same respective periods in 2012.

Prior to the sale by the Company of its interest in the Global Coils joint venture in August 2012, the Company recorded a $25 and $50 increase in the carrying amount of IntriCon’s investment in this joint venture, reflecting the Company’s portion of the joint venture’s operating results for three and six months ended June 30, 2012, respectively.

Other income (expense)

Other income (expense) for the three and six months ended June 30, 2013 was other income (expense) of ($7) and $83, respectively, compared to other expense of ($9) and ($57), respectively, for the same periods in 2012. The change in other income (expense) primarily related to favorable changes in foreign currency exchange rates and foreign government tax refunds.

Income tax expense (benefit)

Income tax expense (benefit) for the three and six months ended June 30, 2013 was $48 and $38, respectively, compared to $57 and $91 for the same periods in 2012. The expense (benefit) for the three and six months ended June 30, 2013 and 2012, respectively, was primarily due to taxable income generated by foreign operations.

Loss from discontinued operations

Loss from discontinued operations, net of income taxes, for the three and six months ended June 30, 2013 was $1,473 and $1,921, respectively, compared to $325 and $685 for the same periods in 2012. The increase in the loss was driven by decreased sales to the U.S. government due to the sequestration. Included in the net loss for the three and six months ended June 30, 2013 were $983 in impairment charges primarily related to long-lived assets and goodwill.

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Liquidity and Capital Resources

As of June 30, 2013, we had $108 of cash on hand. Sources of our cash for the six months ended June 30, 2013 have been from our operations activities, as described below. The Company’s cash flows from operating, investing and financing activities, as reflected in the statement of cash flows, are summarized as follows:


	Six Months Ended

	June 30, 2013			June 30, 2012
Cash provided by (used in):
Operating activities	$	580		$	790
Investing activities		(214	)		(1,060	)
Financing activities		(481	)		393
Effect of exchange rate changes on cash		(2	)		(4	)
Increase (decrease) in cash	$	(117	)	$	119

The most significant items that contributed to the $580 of cash provided by operating activities was the increase in accounts payable and by decreases in inventory, accounts receivable and other assets.

Net cash used in investing activities consisted of purchases of property, plant and equipment of $214.

Net cash used in financing activities of $481 was comprised primarily of repayments of borrowings under our credit facilities and decreases in check written in excess of cash, partially offset by proceeds of borrowings.

The Company had the following bank arrangements:


		June 30, 2013		December 31, 2012

Total borrowing capacity under existing facilities	$	12,128	$	13,233

Facility Borrowings:
Domestic revolving credit facility		4,955		4,360
Domestic term loan		3,250		3,750
Foreign overdraft and letter of credit facility		1,421		1,795
Total borrowings and commitments		9,626		9,905

Remaining availability under existing facilities	$	2,502	$	3,328

Domestic Credit Facilities

The Company and its domestic subsidiaries are parties to a credit facility with The PrivateBank and Trust Company. The credit facility, as amended, provides for:


	§	an $8,000 revolving credit facility, with a $200 sub facility for letters of credit. Under the revolving credit facility, the availability of funds depends on a borrowing base composed of stated percentages of the Company’s eligible trade receivables and eligible inventory, and eligible equipment less a reserve; and

	§	a term loan in the original amount of $4,000.

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In December 2012, the Company and its domestic subsidiaries entered into a Fifth Amendment to the Loan and Security Agreement with The PrivateBank and Trust Company. The amendment, among other things:


	§	permitted the Company to borrow an additional $1,250 under the term loan by increasing the then current principal balance of the term loan from $2,750 to $4,000, while keeping the existing amortization schedule in place.

	§	increased the inventory cap on the borrowing base from $3,000 to $3,500 and removed eligible equipment from the base. Under the revolving credit facility as amended, the availability of funds depends on a borrowing base composed of stated percentages of the Company’s eligible trade receivables and inventory, less a reserve;

	§	eliminated the minimum EBITDA covenant and amended certain other financial covenants; and

	§	changed the dates when covenant compliance will be tested from monthly to quarterly.

The Company was not in compliance with the fixed charge and leverage covenants under the credit facility as of June 30, 2013 and obtained a covenant waiver from The PrivateBank. The Company expects to seek an extension of the term of this facility or a new credit facility in the second half of 2013. As part of the extension or new credit facility the Company will seek revisions to its existing covenants. However, there is no guarantee that any revisions will be favorable to the Company. Additionally, there can be no assurances that a future covenant violation would not lead The PrivateBank or a new lender to declare an event of default and accelerate our obligations under the credit facility.

Loans under the credit facility are secured by a security interest in substantially all of the assets of the Company and its domestic subsidiaries including a pledge of the stock of its domestic subsidiaries. Loans under the credit facility bear interest at varying rates based on the Company’s leverage ratio of funded debt / EBITDA, at the option of the Company, at:


	§	the London InterBank Offered Rate (“LIBOR”) plus 3.00% - 4.00%, or

	§	the base rate, which is the higher of (a) the rate publicly announced from time to time by the lender as its “prime rate” and (b) the Federal Funds Rate plus 0.5%, plus 0.25% - 1.25% depending on the Company’s leverage ratio.

Interest is payable monthly in arrears, except that interest on LIBOR based loans is payable at the end of the one, two or three month interest periods applicable to LIBOR based loans. IntriCon is also required to pay a non-use fee equal to 0.25% per year of the unused portion of the revolving line of credit facility, payable quarterly in arrears.

Weighted average interest on the revolving credit facility was 4.41% for the six months ended June 30, 2013 and 4.52% for the year ended December 31, 2012. The outstanding balance of the revolving credit facility was $4,955 and $4,360 at June 30, 2013 and December 31, 2012, respectively. The total remaining availability on the revolving credit facility was approximately $1,855 and $2,689 at June 30, 2013 and December 31, 2012, respectively. The credit facility expires on August 13, 2014 and all outstanding borrowings will become due and payable. The Company expects to seek an extension of the term of this facility or a new credit facility in the second half of 2013.

The outstanding principal balance of the term loan, as amended, is payable in quarterly installments of $250, commencing with the calendar quarter ended December 31, 2012. Any remaining principal and accrued interest is payable on August 13, 2014. IntriCon is also required to use 100% of the net cash proceeds of certain asset sales (excluding inventory and certain other dispositions), sale of capital securities or issuance of debt to pay down the term loan.

Foreign Credit Facility

In addition to its domestic credit facilities, the Company’s wholly-owned subsidiary, IntriCon, PTE LTD., entered into an international senior secured credit agreement with Oversea-Chinese Banking Corporation Ltd. that originally provided for a $1,977 line of credit. The international credit agreement was modified in August 2010 and again in August 2011 to allow for an additional total of $736 in borrowing under the existing base to fund the Singapore facility relocation, Batam facility construction and various other capital needs with varying due dates from 2013 to 2015. Borrowings bear interest at a rate of .75% to 2.5% over the lender’s prevailing prime lending rate. Weighted average interest on the international credit facilities was 3.93% and 3.89% for the six months ended June 30, 2013 and the year ended December 31, 2012. The outstanding balance was $1,421 and $1,795 at June 30, 2013 and December 31, 2012, respectively. The total remaining availability on the international senior secured credit agreement was approximately $647 and $639 at June 30, 2013 and December 31, 2012, respectively.

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Datrix Promissory Note

A portion of the purchase price of the Datrix acquisition was paid by the issuance of a promissory note to the seller in the amount of $1,050 bearing annual interest at 6%. In August 2012, the Company amended the agreement to change the remaining installment of $350 from the original due date of August 13, 2012 to equal monthly principal and interest payments starting in October 1, 2012 over a one year period.

We believe that funds expected to be generated from operations, the available borrowing capacity through our revolving credit loan facilities and the control of capital spending will be sufficient to meet our anticipated cash requirements for operating needs and for repayment of maturing debt for at least the next 12 months. If, however, we do not generate sufficient cash from operations, or if we incur additional unanticipated liabilities, we may be required to seek additional financing or sell equity or debt on terms which may not be as favorable as we could have otherwise obtained. No assurance can be given that any refinancing, additional borrowing or sale of equity or debt will be possible when needed or that we will be able to negotiate acceptable terms. In addition, our access to capital is affected by prevailing conditions in the financial and equity capital markets, as well as our own financial condition. Furthermore, if we fail to meet our financial and other covenants under our loan agreements, absent waiver, we will be in default of the loan agreements and our lenders could take action that would adversely affect our business. There can be no assurance that our lenders will provide a waiver of any default in our loan covenants. While management believes that we will be able to meet our liquidity needs for at least the next 12 months, no assurance can be given that we will be able to do so.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

ITEM 4. Controls and Procedures

The Company’s management, with the participation of its chief executive officer and chief financial officer, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), as of June 30, 2013 (the “Disclosure Controls Evaluation”). Based on the Disclosure Controls Evaluation, the Company’s chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures were effective to provide a reasonable level of assurance that: (i) information required to be disclosed by the Company in the reports the Company files or submits under the Securities Exchange Act of 1934, as amended (“Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) information required to be disclosed in the reports the Company files or submits under Exchange Act is accumulated and communicated to management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure, all in accordance with Exchange Act Rule 13a-15(e).

There were no changes in the Company’s internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f), during the quarter ended June 30, 2013, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings

The information contained in note 10 to the Consolidated Condensed Financial Statements in Part I of this quarterly report is incorporated by reference herein.

ITEM 1A. Risk Factors

We may be in violation of our bank covenants from time to time.
The Company was not in compliance with the fixed charge and leverage covenants under its credit facility as of June 30, 2013 and obtained a covenant waiver from The PrivateBank. The Company expects to seek an extension of the term of this facility or a new credit facility in the second half of 2013. As part of the extension or new credit facility the Company will seek revisions to its existing covenants. However, there is no guarantee that any revisions will be favorable to the Company. Additionally, there can be no assurances that a future covenant violation would not lead The PrivateBank or a new lender to declare an event of default and accelerate our obligations under the credit facility.

In addition to the foregoing and the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2012, which could materially affect the Company’s business, financial condition or future results. The risk factors in the Company’s Annual Report on Form 10-K have not materially changed. The risks described in our Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

ITEM 3. Defaults upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures.

Not applicable.

ITEM 5. Other Information

None.

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ITEM 6. Exhibits


	(a)	Exhibits

31.1		Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of principal executive officer pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of principal financial officer to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following materials from IntriCon Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Condensed Balance Sheets as of June 30, 2013 (Unaudited) and December 31, 2012; (ii) Consolidated Condensed Statements of Operations (Unaudited) for the Three Months Ended June 30, 2013 and 2012; (iii) Consolidated Condensed Statements of Comprehensive Income (Loss) (Unaudited) for the Three Months Ended June 30, 2013 and 2012; (iv) Consolidated Condensed Statements of Cash Flows (Unaudited) for the Three Months Ended June 30, 2013 and 2012; and (v) Notes to Consolidated Condensed Financial Statements (Unaudited)*



*Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	INTRICON CORPORATION
	(Registrant)


Date: August 14, 2013	By:	/s/ Mark S. Gorder
	Mark S. Gorder
	President and Chief Executive Officer
	(principal executive officer)


Date: August 14, 2013	By:	/s/ Scott Longval
	Scott Longval
	Chief Financial Officer and Treasurer
	(principal financial officer)

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EXHIBIT INDEX


31.1		Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of principal executive officer pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of principal financial officer to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following materials from IntriCon Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Condensed Balance Sheets as of June 30, 2013 (Unaudited) and December 31, 2012; (ii) Consolidated Condensed Statements of Operations (Unaudited) for the Three Months Ended June 30, 2013 and 2012; (iii) Consolidated Condensed Statements of Comprehensive Income (Loss) (Unaudited) for the Three Months Ended June 30, 2013 and 2012; (iv) Consolidated Condensed Statements of Cash Flows (Unaudited) for the Three Months Ended June 30, 2013 and 2012; and (v) Notes to Consolidated Condensed Financial Statements (Unaudited)*



*Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.